Smart Firms Are Outsourcing Their Business Services To An Offshore Company In Emerging Europe

While countires like Poland, the Czech Republic, Slovakia, Hungary, Romania and Bulgaria are traditionally known for their low-cost manufacturing capabilities, the fast-developing region is becoming known for its offshore business services just as quickly. Its growing importance as a BPO/SSC location has not gone unnoticed, holding approximately 7 to 8 per cent of the global services off-shoring market but they can still take more. US and Western European companies are already recognising the globally competitive offshoring and outsourcing (O&O) sector in this dynamic region.

Poland offers the greatest opportunity due to its big population and high standard of education producing the largest talent pool. That’s along with a solid system of administrative support and incentives for potential investors. There is currently a high percentage of students enrolled in business-related studies, while the availability of reasonably priced office space is also available. As a leading destination in international offshore services there are already 280 BPO/SSC centres 75,000 people employed in this relatively new industry, with foreign companies already locating themselves across the bigger cities in finance and accounting, research and development, and IT, including UniCredit and Hewlett-Packard. Meanwhile, Krakow is already home to over 100 international firms, including Google, IBM, Motorola and Fujitsu.

Support and incentives are offered by central and local CEE administrations for potential investors in offshore servicescompanies, with Poland offering investment grants for job creation, EU subsidies and CIT exemptions within SEZs investing a large portion of its EU Cohesion Policy funding allocation for 2014 to 2020 into focussing on its strengths in BPO/SSC, IT/ICT, along with significant investment in R&D in these sectors.

And it’s looking like other CEE countries are poised to follow suit in BPO services, according to the McKinsey report. Along with the same advantage of cultural and geographic proximity, Bulgaria is also a strong competitor as an investment location. It boasts the lowest labour costs in the region, averaging EUR 426 per month, 1.97 EUR for hourly labour, in 2011. Romania’s Bucharest also ranks well in McKinsey’s offshoring readiness scale, across cost, talent, infrastructure, environment, risk and market maturity. The country is also a top IT outsourcing service provider worldwide with the fastest growth rate in terms of number and quality of IT specialists in the region.

The majority of the industry is still held by India and the Philippines internationally but the highly skilled, low cost and multilingual workforce, as well as CEE’s relatively close proximity and stable economy, is becoming a very attractive destination for outsourcing. That’s especially true in the case of an industry that’s increasingly shifting focus to nearshoring their BPO/SSC services. As Principal of leading strategic advisory firm Vikrant Khanna recently told Emerging Europe, “near-shoring essentially means that the work does move out of the host country but instead of going to a far-shore location, like India or the Philippines, it actually ends up within the same region where the host country is.” It’s no wonder then than Poland became the leading European country in Tholons’ Top 100 Outsourcing Destinations 2014, beating Ireland out for ninth place in the world’s top ten offshore company business services. Khanna adds, “in the long run, we definitely see Eastern Europe coming up stronger.”